STEP Analysis and Market Segmentations for a Motorola Company - Essay Example

Introduction Motorola is known around the world for innovation and leadership in wireless and broadband communications. Motorola (NYSE:MOT) is a global Fortune 100 leader in broadband, automotive communications, wireless technologies, and embedded electronic products. The company’s Government and Enterprise Mobility Solutions (GEMS) business provides integrated radio communications and information solutions for public safety, government, and enterprise customers. Widely distributed sales and system integration teams previously collaborated by improvised phone, e-mail, and paper processes. Motorola consists of three businesses: Connected Home Solutions, Networks & Enterprise, and Mobile Devices. Connected Home Solutions provides a scalable, integrated end-to-end system for the delivery of broadband services that keeps consumers informed, entertained and connected. Mobile Devices designs, manufactures, sells and services wireless subscriber and server equipment for cellular systems, portable energy storage products and systems, servers and software solutions and related software and accessory products. Networks & Enterprise solutions include secure two-way radio, cellular and wireless broadband systems to meet the needs of public safety, government, private, and service provider and enterprise customer’s world-wide. The Motorola RAZR cellular phone. The sleek RAZR mobile phone is an innovative product marketed as ‘Ultrathin’ and light. Razr reported profits of $1.75 billion on sales of $9.42 billion with 750,000 units of the phone to wireless carriers in the first 30 days on the market (Hesseldahl 2005), STEP Analysis Social and Cultural Factors A defining characteristic of Motorola’s RAZR phone is international use and multi-national business, which is characteristic of a social and cultural worldview. This worldview may be comprised of the group’s norms, values and assumptions for how people interact with each other (Distefano & Mavnevski, 2000). This is relative to the need of similarity within a group and self-affirming behaviour mentioned earlier. Motorola is under external pressure to provide a consistently innovative product that can span different languages and cultures. This includes being sensitive to cultural behaviours and language structure in user manuals, product design, and marketing strategy. Technological Advances The use of information systems infrastructure by industrial and service companies may be a source of competitive advantage for innovative and knowledge-based companies. Motorola specialises in the commerce of innovative communications technology, and therefore must maintain a contemporary approach to strategic management, which guides attention toward the understanding of the organisational learning process and the management of a firms knowledge base (Conner and Prahalad, 1996) The management of knowledge plays an outstanding role in any interdisciplinary theory of entrepreneurship (Ripsas, 1998) and in the development of technology-based companies. Motorola must be prepared to address new technologies, innovate old technologies, while maintaining high quality of product. Cellular technology constantly changes the way global consumers communicate, relate, inform, and entertain. The sheer success of the RAZR phone shows that Motorola seized a significant opportunity in the ability to deliver a product of innovative designs. The impact of technology changes is the most significant for Motorola RAZR, first to maintain the level of innovation consumers expect and second to deliver consistent product innovation that changes the way consumers use technology to create a need for the technology. Economic Trends Hirst and Thompson explain a the characteristics of the world economy: "The world economy has internationalised in its basic dynamics, it is dominated by uncontrollable market forces, and it has as its principal economic actors and major agents of change truly transitional corporations, that owe allegiance to no nation state and locate wherever in the globe market advantage dictates." (Hirst and Thompson, 1996, p. 1). For Motorola, economic concentrations must include the idea of "macro-economic unification" which, in the words of Glyn and Sutcliffe, "represents the idea that the world is now really a single economy in the macro-economic sense. That means that the main determinants of income and employment can now only be understood at a global and no longer a national level." (Glyn and Sutcliffe, 1992, p. 77). This means that the company, which works on national, international and multinational levels, must be prepared to examine their business from an economic viewpoint that encompasses these three levels of activity, especially as the world becomes a more unified economy. Political, Legal and Regulatory Factors Government regulations are sometimes threatening mechanisms for value representation and virtually no support to communication processes that create win/win situations where multiple stakeholder and shareholders can successfully pursue their mutual interests (Deetz, 1995). In addition to various national and international regulations, there are many more rules that stem either from regional or local governments or industry oversight committees. The end result is that Motorola must juggle multiple sets of regulations on local and international levels while maintaining industry-specific regulations. However, regulatory factors are not always a threat to the industry. The Independent Committee for the Supervision of Standards of Telephone Information Services (ICSTIS), along with the Department for Culture, Media and Sport, Gambling and National Lottery Licensing Division, are considering how mobile services are used in the area of lotteries and other competitions in the UK, which may create a new market for the mobile phone industry. Segmentation Motorola is segmented into Mobile Devices, Government and Enterprise Mobility, Networks, and Connected Home Solutions. The Mobile Devices segment is focused on profitable and sustainable growth. Motorola originally invented the clamshell phone and has reinvented it with the RAZR. Motorola states that their segmentations strategy is to “accomplish our strategy by driving our seamless mobility vision, creating valuable differentiation of our products through design, and providing compelling, rich experiences to consumers and carriers” (Motorola pp 2 2005). Mobile Devices Motorola’s Mobile segment strategy is to increase the overall market share in 2005 and solidify its hold on the second-largest world-wide market share of wireless handsets (Motorola 2005). The segment experiences intense competition in worldwide markets from numerous global competitors, including some of the worlds largest companies. The segments primary competitors are European and Asian manufacturers. Currently, its largest competitors include Nokia, Samsung, LG and Sony Ericsson. The company’s strategy is to market the RAZR and other hand held device mobility vision, creating valuable differentiation of their products through design, and providing compelling, rich experiences to consumers and carriers (Motorola 2005). The zone of tolerance has been sited as an important concept in both the service management and consumer behaviour literature, and has been employed to model the relationship between different expectation levels (Zeithaml, Berry, Parasuraman, 1993) and has been used to supply a range, or scale upon which to place a particular outcome. According to Zeithaml, Berry and Parasuraman, (1996): Desired expectations represents: “the level of service the customer hopes to receive, consisting of a blend of what the customer believes can and should be delivered.” Adequate service represents: “the second, lower level of service is adequate service which is the level of service the customer will accept.” Motorola’s development of the RAZR and subsequent products showed technological innovation, and with that innovation came a need to create a sustainable customer base. The use of ‘rich customer experience’ shows that Motorola is aware of a customer’s zone of tolerance as the delivery of a product that lives up to its expectations. The Mobile segment strategy is also to invest in research and development of leading technologies and services to remain competitive (Motorola 2005). In 2005, the segments total investment in R&D increased to support new product development. Amber (2000) has defined brand equity as an intangible asset built by marketing, and which exists largely in the heads of stakeholders, especially those of the end user. The author further pointed out that if a company got its brand equity right, profits should largely take care of it. The import of this statement can be understood from the components that make the equity of a brand. These are brand awareness and brand image. A brand that people have good knowledge about and can readily recall with favourable associations is an enduring asset to whoever owns it. Furthermore, it would have favourable image and therefore well perceived. Such a brand can be said to have a higher equity or value. It is not too difficult to sell products and services with this brand name tacked on it. Higher volumes of sales at minimal costs transcend into higher profits. The RAZR phone was an instant hit, increasing Motorola brand recognition. Brand recognition is a very strong marketing strategy, and Motorola recognises this as a component (Motorola 2005). By using customer relationship building and innovative technology to develop loyal customers and brand recognition, Motorola was able to create brand equity and sustain a certain level of expectation from customers. This is an excellent marketing strategy and one that is increasingly popular amongst high technology manufacturers such as Dell and Nokia. Government and Enterprise Mobility The Government and Enterprise Mobility segment provides communications and information systems compliant with both existing industry digital standards. The principal Government customers are public safety agencies, such as police, fire, emergency management services and military. The principal enterprise customers include enterprise businesses engaging in manufacturing, transportation, utilities, courier services, field services and financial services. The mobile device segment focuses on relationship building, while the government and enterprise segment strategy is built around ‘mission critical,’ ‘public safety’ and ‘sophisticated encryption technology’ (Motorola 2005). Key elements in Motorola’s government strategy include: providing integrated voice, data and broadband over wireless systems at the local, state and national levels, benefiting from the ongoing migration from analogue to digital end-to-end radio systems, implementing interoperable communications and information systems, especially related to global homeland security (Motorola 2005). For the enterprise marketing strategy, Motorola focuses on a solid portfolio of products to streamline supply chains, improve customer service in the field, and increase data collection accuracy with employee productivity (Motorola 2005). Characteristics that make for strong brands are not different from that which makes service brands successful. In a study involving more than 2500 brands, Clifton (2002) reported that three factors make brands strong. These are (i) clarity of vision and values (ii) consistency in the manner in which the brand is applied and (iii) leadership in the way the brand renews itself and exceeds customer expectations. Motorola’s strategy, as outlined above, is to deliver a safe communications device, which speaks to the customer’s desire for clarity of vision. Motorola places strong emphasis on their ability to provide consistent security in information systems, and also matches the third requirement by maintaining a strong research and development program between all segments. With this approach, employees and customers alike are adequately informed of what the brand is seeking to achieve and benefits that shall accrue to them if they are successfully accomplished. Networks, and Connected Home Solutions Motorola’s Network segment provides end-to-end cellular networks, including radio base stations, base site controllers, associated software and services, mobility soft switching, application platforms and third-party switching (Motorola 2005). Connected Home Solutions is a service segmentation that designs manufactures and sells a wide variety of broadband products. the segment provides interactive digital set-top boxes and Internet gateways that provide access to entertainment and two-way communications services (Motorola 2005). These segments have similar strategies and function as service products. Parasuraman et al. (1988) claims that perceptions of quality of service are a result of evaluating service delivery in relation to pre-consumption expectations known as the “disconfirmation” model. Disconfirmation models are based on the disconfirmation paradigm (Oliver, 1980). Quality is therefore defined as the gap between consumer’s expectations and perceptions, and a customer will perceive quality positively only when a service provider meets or exceeds his expectations. Based on this paradigm Parasuraman et al. (1985) developed service measuring tool known as SERVQUAL. This measures service quality within certain service constructs, which act as service quality determinants. The two 22 items questionnaires with 5 points Likert scale answers were developed in order to measure expected and perceived quality within 10 service constructs. Later on, the number of constructs was reduced to five. These are as follows: Reliability: the ability to provide the pledged service on time, accurately and dependably. Responsiveness: the ability to deal effectively with complaints and promptness of the service. Assurance: Knowledge and courtesy of workers and their ability to inspire trust and confidentiality. Empathy: Individualised attention the company provides its customers with. Tangibles: These include: the state of facilitating goods; physical condition of the buildings and the environment; appearance of personnel; and condition of equipment. Motorola’s Network and Connected home solutions segment focuses on a strategy to enable reliable mobility across multiple access technologies, including cellular, PON and wireless broadband (Motorola 2005). Motorola’s strategy in this segment is highly based on developing better technology and maintaining a strong level of competitiveness, showing a strong tendency towards responsiveness towards the customers’ needs and assurance of knowledge management and service continuity (Motorola 2005). Competitive marketing strategy in this segment includes the technology offered and the payment terms as well as performance. Of special importance is the price and time-to-market for technology (Motorola 2005. Price is a major area of competition and often impacts margins for initial system bids, particularly in emerging market (Motorola 2005. This recognition of price as a significant impact on strategy shows that Motorola maintains an amount of empathy towards the customer’s need for individual attention and relationship. Time-to-market has also been an important competitive factor, especially for new systems and technologies (Motorola 2005). This is the tangible component of Motorola’s service strategy, in particular the release of a technology product must be timed accordingly, and especially before the usefulness of the product has expired. Conclusions and Recommendations The implications of consumer studies to business relationships and processes are relative to the measurements and foreseeing consumer trends in purchases. Nasir and Nasir (2005) note that as firms improve on their loyal customer base by retaining current consumers, the identification of satisfaction becomes important as one of the components of measuring and relating to consumers and improving perceptions of branding. Furthermore, Simms (p 1 2005) notes that […]premium brands promise a lot, but they are failing to deliver against rising consumer expectations of all products and services. Premium brands, once aspiration, have lost their sheen, as the public looks instead for quality and clear value for money in a single purchase. In relation to Motorola’s RAZR business goals to retain more consumers, it becomes important to look at the improvements and continuations of the company’s strategy. Hart (1998) has outlined key principles for creating and building brand names. Some of the strategic considerations she counsels brand name creators to consider borders on (i) whether the new product or service is innovative or not (ii) line extensions are planned for the future and (iii) the nature of protection the brand can afford. It has been stressed that any name chosen should ideally be easy to pronounce, understandable to users and also consistent with the cultural values and norms of where it is to be applied. The Motorola RAZR has identified with innovation, being one of the highest selling products in mobile communications history. It is now time for Motorola to innovate again, and the company has with the upcoming release of the Q, a phone similar to the RAZR that will be released in November of 2006. Motorola should continue to plan for innovation strategy that meets the standards Hart outlined. Using naming as a marketing strategy has also worked well, however, it should be noted that Motorola must also maintain a connection with customer culture and time the release of new products to meet customer’s expectations. In highly competitive market situations, as is now the case in most business sectors, strong brands cannot be built if they are not supported by excellent services. Indeed, the market entry requirements of most sectors in terms of quality have witnessed upward adjustments in recent times. When the core attributes of a particular product or service category have been satisfied by most service providers, the differentiating yardstick then becomes the additional fringe benefits or value the customer can be provided with. This is where customers’ expectations can be exceeded. Companies or brands that focus on such areas can gain competitive advantage. References Amber, T. (2000). "Marketing and the bottom-line: The new metrics of corporate wealth." Pearson Educational Limited, London, Great Britain. Clifton, R. (2000). "Brands and their importance in growing a business" Interbrand, Great Britain. Conner, KR and Prahalad, CK (1996) A resource-based theory of the firm: Knowledge versus opportunism, Organization Science, 7: 477-501 Deetz, S. (1995). Transforming communication, transforming business: Stimulating value negotiation for more responsive and responsible workplaces. International Journal of Value-Based Management, 8, 255-78. Distefano, J. J. and Maznevski, M. L. (2000). Creating value with diverse teams in global management. Organizational Dynamics, 29, 45-63. Glyn Andrew and Sutcliffe Bob (1992), "Global but Leaderless : The New Capitalist Order", R. MILIBAND (ed), The Socialist Register 1992, pp. 76-95 Hart, S. (1998). "Developing new brand names. In : Brands, The new wealth creators" Eds. Hart, S. and Murphy, J. , Interbrand/Macmillan Press Ltd, USA. Hesseldahl Arik (2005) Motorolas Razr Thick Profits. Business Week Online. [online] [http://www.businessweek.com/technology/content/oct2005/tc20051018_039341.htm] Hirst, Paul and Grahame Thompson. (1996). Globalization in Question. London: Polity Press. Motorola (2005) Annual Report. Motorola, Inc. 1303 E. Algonquin Road Schaumburg, Illinois 60196 U.S.A. [online] [www.motorola.com] Nasir, Suphan, Nasir, V. Aslihan (2005) "Analyzing the Role of Customer-Base Differences in Developing Customer Relationship Management Strategies." Journal of American Academy of Business, Cambridge Vol. 7 Issue 2, p32-38, 7p Oliver, Richard L. (1988) "Response Determinants in Satisfaction Judgments." Journal of Consumer Research 14 (March): 495-507. Parasuraman, Zeithaml and Berry (1988), "SERVQUAL: A Multiple-Item Scale for Measuring Customer Perceptions of Service Quality,"Journal of Retailing, (Spring), pp. 12-40. Simms, Jane (2005) "Promises, promises" :Marketing (UK) Haymarket Business Publications p30-32, 3p, Zeithaml Valarie A., Parasuraman A., Berry Leonard L. (1985): Problems and Strategies in Services Marketing. Journal of Marketing (Spring 1985), pp. 33-46 Read More